January’s Jobs Report

“It isn’t hard to be good from time to time…. What’s tough is being good every day.” Willie Mays. When it comes to recent Jobs Reports, what has been tough is being good every month, as both January’s and December’s numbers were disappointments.

January’s Jobs Report can best be described as lackluster, as employers added just 113,000 new workers. This was well below expectations of 175,000 new jobs. In addition, the number of job creations for December was raised just a paltry 1,000, bringing December’s total to 75,000. November was revised higher to 274,000.

The Unemployment Rate did fall to 6.6 percent, from 6.7 percent. However, this is not necessarily a good metric of labor market health, as the more important Labor Force Participation Rate (LFPR) remains at 63 percent, a 35-year low. The LFPR measures the proportion of working-age Americans who have a job or are looking for one, and it should be moving higher in a recovery.

Also of note, productivity in the fourth quarter of 2013 rose by 3.2 percent, with both the third and fourth quarters the highest since the second half of 2009. Employers are squeezing more out of current workers and may not be on the hunt for new employees given the economic landscape, which is another negative for the labor market.

In housing news, research firm CoreLogic reported that home prices, including distressed sales, rose by 11 percent in December 2013 compared to December 2012. December marked the 22nd consecutive year-over-year gain in home prices nationally. However, from November to December, prices fell by 0.1 percent.

What does this mean for home loan rates? Mortgage Bonds and home loan rates have seen some improvement of late, due to some weak economic reports, while Stocks have suffered as a result. But a big question remains as we move ahead in 2014: If economic reports continue to be weak, will the Fed continue to taper its Bond purchases? Remember that the Fed is now purchasing $35 billion in Treasuries and $30 billion in Mortgage Bonds (the type of Bonds on which home loan rates are based) to help stimulate the economy and housing market. This figure is down from the $85 billion in Bonds and Treasuries the Fed had been purchasing last year. The timing of further tapering is sure to impact Stocks, Bonds and home loan rates throughout the year, and it is a key story to monitor.

The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions at all for you or your clients.

February Consumer Sentiment.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving and when they are moving lower, home loan rates are getting worse.

To go one step further a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Mortgage Bonds and home loan rates improved after the weak Jobs Report for January was released. I’ll be watching the news closely this week to see if these improvements continue.

Pinnacle Mortgage Group, Inc. is licensed as follows: Lakewood Corporate Office National Mortgage Licensing System (NMLS) ID 3014, Columbia MT NMLS ID 583079, Irvine NMLS ID 190280, San Clemente NMLS ID 893358, San Juan Capistrano NMLS ID 1007670, Temecula NMLS ID 976331. AZ Department of Financial Institutions Mortgage Banker License 906967, Irvine Branch License BK-BR-0115546, San Juan Capistrano Branch License BKBR-0118134, Temecula Branch License BKBR-0118076. CA Department of Business Oversight Finance Lenders Law License No 603 9394, Columbia MT – Branch License Number 603 I891, Irvine Branch License Number 603 G645, San Clemente Branch License Number 603 J578, San Juan Capistrano Branch License Number 603 K107, Temecula Branch License Number 603 K068. CO Mortgage Company Registration: Regulated by the Division of Real Estate. NM Regulation and Licensing Department Mortgage Loan Company License No 01237. OR Division of Finance and Corporate Securities Mortgage Lender License No ML-3386, Irvine Mortgage Lending Branch License Number 3386-3, San Juan Capistrano Lending Branch License Number ML-3386-5, Temecula Mortgage Lending Branch License Number ML-3386-4. TX Savings and Loan Department Mortgage Banker Registration, Registered as Pinnacle Mortgage Group, Inc., d.b.a. BRTH Companies; Irvine Branch – SML Mortgage Banker Branch Registration; This office is licensed and examined by the Office of Consumer Credit Commissioner of the State of Texas. WA Department of Financial Institutions Consumer Loan Company License CL-3014, Irvine Branch Office License Number CL-190280, San Juan Capistrano Branch Office License Number CL-1007670. For professional use only. Not intended for consumer distribution.The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.